PRELIMINARY PROXY STATEMENT
INDEPENDENT SHAREHOLDER SOLICITATION
RE: AVONDALE INDUSTRIES INC.
APRIL 15, 1994
This proxy statement is provided to shareholders of
Avondale Industries, Inc. ("Avondale" or "Company") by the AVONDALE
SHAREHOLDER COMMITTEE ("Shareholder Committee") in connection with
the solicitation on behalf of the Shareholder Committee of proxies
for use at the Annual Meeting of stockholders of the Company
scheduled to be held on Friday, May 6, 1994, at 10:00 a.m. local
time at the Company's Administration Building, 5100 River Road,
Avondale, Louisiana, and at any adjournment thereof.
This proxy statement provides an explanation of six
corporate governance reform shareholder resolutions ("Shareholder
Resolutions") that will be offered for a vote at the May 6 Annual
Meeting. Members of the Shareholder Committee have informed the
management of Avondale that the Shareholder Resolutions discussed
herein will be formally raised for a vote at the annual meeting. We
urge you to consider the corporate governance reform Shareholder
Resolutions and vote in favor of the reforms. The proxy card
enclosed allows you to vote for the election of directors and the
Shareholder Resolutions.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED
BLUE PROXY CARD TO:
Avondale Shareholder Committee
3515 I-10 Service Road
Matairie, LA 70002
Only holders of record of common stock of the Company at
the close of business on April 5, 1994 are entitled to notice of
and to vote at the annual meeting. On that date, the Company had
14,464,175 shares of common stock, each of which is entitled to one
vote with respect to each matter considered at the annual meeting.
This proxy statement is being mailed to stockholders on or
about April 15, 1994, and the cost of soliciting proxies will be
borne by the Shareholder Committee. In addition to the use of the
mails, proxies may be solicited by personal interview and
telephone. Banks, brokerage houses and other institutions, nominees
and fiduciaries will be requested to forward the soliciting
material.
SHAREHOLDER COMMITTEE
The Shareholder Committee is composed of record
shareholders and Company employees who are participants in the
Avondale Industries, Inc. Employee Stock Ownership Plan ("ESOP").
The Committee was formed as a shareholder advocacy group to advance
the Shareholder Resolutions discussed below. The resolutions are
designed to help compel the Board of Directors to undertake
corporate governance reforms that we believe are critically
important to the Company.
Among the Committee members are the United Brotherhood of
Carpenters and Joiners of America ("UBC") which is a record holder
of 50 shares of Company stock and John Meese, president of the
Metal Trades Department, AFL-CIO. An election among Avondale
employees was conducted in 1993 by the Metal Trades Department, of
which the UBC is an affiliate. The outcome of that election is at
this time unresolved, as the matter is the subject of National
Labor Relations Board proceedings.
REVOCATION RIGHTS
If you have already voted the proxy card you received from
the Company, you can change your vote. A proxy card is revocable at any
time prior to being voted by (1) executing a new proxy card; or
attending and voting at the meeting; or (3) delivering written
notice of revocation to the Company or to the trustees of the
Company Employee Stock Ownership Plan in which your stock is held.
Only your latest-dated proxy card will be counted.
ELECTION OF DIRECTORS
At the 1994 annual meeting, shareholders will be asked to
vote in the election for Class II board of directors. The Board of
Directors' nominees are Messrs. Albert L. Bossier and Hugh A.
Thompson. The Shareholder Committee herein incorporates the
discussion of the nominees on pages 1, 2, 3 and 4 of the Company's
proxy statement. There is no contest for Board seats. The persons
named in the attached proxy will cast a vote of "ABSTAIN" in the
election of nominees Albert L. Bossier, Jr. and Hugh A. Thompson
unless you instruct us otherwise.
MANAGEMENT COMPENSATION
The Shareholder Committee incorporates herein the
discussion of the subject of management compensation on pages six
through twelve of the Company's proxy statement.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
Employees of the Company and its subsidiaries own 50.4% of
the Company's common stock though an Employee Stock Ownership Plan.
The Shareholder Committee incorporates by reference the discussion
of security ownership contained on pages 4, 5 and 6 of the
Company's 1994 proxy statement.
CORPORATE GOVERNANCE REFORM PROPOSAL
We strongly believe that our Company's financial
performance is closely linked to its corporate governance policies
and procedures, and the level of accountability they impose. Since
the legal authority to run American corporations rests with the
board of directors, the election of corporate directors is the
primary avenue by which shareholders can promote management
accountability. Unfortunately, we believe Avondale's Board of
Directors ("Board") has devised a number of technical procedures
that provide a tremendous advantage to incumbents during director
elections, reduce the Board's effectiveness and reduce the Board's
accountability to shareholders. A close study of the Company's by-
laws and articles of Incorporation reveals the following:
the absence of a requirement that the majority of the
Board of Directors be individuals who are neither
employees of the Company nor individuals engaged in
business transactions with the Company;
the absence of confidential proxy voting;
the absence of a Nominating Committee for Board of
Director candidates;
the absence of cumulative voting;
the absence of a requirement that all directors be
elected annually;
a Management Compensation Committee selected by the
chairman, CEO and president;
by-law provisions: (i) allowing the adoption of by-laws
only by a majority of directors, (ii) requiring 80%
approval for the amendment or repeal of existing by-laws,
and (iii) allowing a majority of directors to
unilaterally overturn shareholder votes to amend or
repeal by-laws; and
"golden parachute" agreements that provide lucrative
severance payments to senior executives in the event of
a change in control.
We believe these measures have a negative impact on
shareholder value by reducing accountability of directors, and the
senior managers they hire. The chart on page 13 of Avondale's April
6, 1994 proxy statement provides evidence of the Company's
underperformance relative to its peer group. According to the
chart, the performance of Avondale Industries stock was 248 percent
below a composite of its peer group at the conclusion of the five
years ending 12/31/93. In terms of real dollar losses to investors,
the chart indicates that a $10,000 investment in Avondale's common
stock on 12/31/89 would have declined in value to $6,376 by
12/31/93. In contrast, a $10,000 investment in the common stock of
the peer group would have increased in value to $18,080 by
12/31/93. The $11,704 gap between an investment in Avondale
Industries and an investment in the Company's peer group helps
quantify the high cost of poor performance.
Additionally, our Company has LOST money in each of the past
four years:
Fiscal Year Net Loss Net Loss Per Share
1993 $ 8.8 mil. $0.61
1992 11.2 mil. 0.78
1991 140.9 mil. 9.76
1990 25.8 mil. 1.71
We strongly believe that our Company's underperformance
relative to its peer group is a result of mismanagement, not market
forces. We believe this mismanagement is perpetuated by a director
selection process and by-law provisions which allow incumbent
management control. We believe the shareholders can no longer
afford the price of Mr. Bossier's unchecked mismanagement.
Therefore, in this Proxy Statement we present to other Company
shareholders a series of corporate governance reform resolutions
designed to improve the integrity of the director selection process
and the quality of the Board's decision-making processes. The
management of the Company has been properly notified that the
following Shareholder Resolutions will be brought to a vote at the
upcoming meeting of shareholders:
(1). INDEPENDENT BOARD RESOLUTION: The resolution would
urge the Board to amend the by-laws to require the majority
of the directors elected to the Board be neither company
employees, relatives of management, nor representatives of
other companies or law firms that maintain business
relationships with the Company.
(2). NOMINATING COMMITTEE RESOLUTION: The resolution would
urge the Board to establish a Nominating Committee of the
Board composed entirely of nonmanagement directors to
review and nominate Board candidates.
(3). CONFIDENTIAL PROXY VOTING RESOLUTION: The resolution
would urge the Board to provide that all ballots be kept
confidential, except to the extend the law requires
disclosure, and that vote tabulation be done by independent
election inspectors.
(4). BOARD OF DIRECTORS DECLASSIFICATION RESOLUTION: The
resolution would urge the Board to provide that all
directors stand for election annually instead of one-third
of the Board members being elected each year for a three
year term.
(5). CUMULATIVE VOTING RESOLUTION: The resolution would
urge the Board to provide that Company shareholders could
cumulate their votes for particular directors.
(6). RECONSTITUTION OF THE COMPENSATION COMMITTEE: The
resolution would urge the Board to provide that the Board's
Compensation Committee be composed entirely of
non-management directors selected by the full Board.
We believe that each of these Shareholder Resolutions
present necessary reforms to the Company's current governance
system which vests too much power in the hands of the incumbent
Board and management. As a complimentary set of reforms, we believe
the Resolutions will help to spur fundamental change in the
director nomination and election processes. It is our belief that
the result of such changes will be greater Board and management
accountability to the owners of the Company.
Please read the text of the proposed resolutions and the
supporting statements which accompany each. The enclosed blue proxy
card affords you an opportunity to vote on the election of
directors and each of the proposed Resolutions.
SHAREHOLDER RESOLUTION: INDEPENDENT BOARD OF DIRECTORS
BE IT RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") hereby urge that the Company's Board of Directors take
the steps necessary to amend the Company's by-laws, effective after
the 1994 annual meeting of shareholders, to provide that the Board
of Directors shall consist of a majority of Independent Directors.
The by-law change shall be done in a manner which does not affect
the unexpired terms of previously elected directors. For these
purposes, the definition of Independent Director shall mean a
director who:
has not been employed by the Company or an affiliate in an
executive capacity within the last five years;
was not, and is not a member of a corporation or firm that
is one of the Company's paid advisers or consultants;
is not employed by a significant customer, supplier or
provider of professional services;
has no personal services contract with the Company;
is not employed by a foundation or university that receives
significant grants or endowments from the Company;
is not a relative of the management of the Company;
is not a director of a company on which Avondale
Industries'Chairman or Chief Executive Officer is also a
board member; and
is not a shareholder who has signed shareholder agreements
legally binding him or her to vote with management.
SUPPORTING STATEMENT
The purpose of this Shareholder Resolution is to
incorporate within the Board of Directors a basic standard of
independence that we believe will permit clear and objective
decision-making in the best long term interests of shareholders.
A Board of Directors must formulate corporate policies and monitor
the activities of management in implementing those policies. Given
those critical functions, we believe that it is in the best
interest of all shareholders if at least a majority of our
representatives be independent, as defined above.
The Business Roundtable, an association of Fortune 200
CEOs, also supports corporate boards of directors being composed of
a majority of independent directors. The Business Roundtable
publication Corporate Governance and American Competitiveness
states:
Board of directors of large publicly-held
public corporations should be composed
predominately of independent directors who do
not hold management responsibilities within
the corporation... In order to underscore
their independence, non-management directors
should not be dependent financially on the
companies on whose boards they serve.
Avondale Industries' Board of Directors is currently
composed of three current officers (Bossier, Kitchen and Dupont),
one former officer (Harmeyer), a partner in a law firm which
received $887,583 in fees from the Company in 1992 (Correro) and a
college professor (Thompson). Only Mr. Thompson meets the basic
standard of independence set forth by the Resolution proposed by
the Shareholder Committee.
We urge you to VOTE FOR THIS RESOLUTION. We believe a Board
of Directors composed of a majority of Independent Directors will
help insure better management accountability.
SHAREHOLDER RESOLUTION: NOMINATING COMMITTEE
BE IT RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") urge the Board of Directors to establish a Nominating
Committee of the Board in conformity with Company by-laws. The
Nominating Committee shall identify and recommend for nomination
candidates to stand for election to the Board of Directors. The
Committee shall be composed entirely of members who:
have not been employed by the Company or an affiliate in an
executive capacity within the last five years;
are not a member of another company or firm that is one of
the Company's paid advisers, consultants or a significant
customer or supplier of the Company;
have no personal services contract with the Company;
are not employed by a foundation or university that
receives significant grants or endowments from the Company;
are not a relative of the management of the Company;
are not a board member or employee of another company whose
board includes directors or employees of the Company; and
are not a shareholder who has signed shareholder agreements
legally binding him to vote with management.
The Nominating Committee's responsibilities shall include
establishing procedures for the nomination process and developing
for Board approval the criteria for nomination. These procedures
and criteria should be described in that portion of the Company's
proxy statement covering the election of directors.
SUPPORTING STATEMENT
This Resolution is intended to help strengthen the process
by which nominees for director of the Company are selected. We
believe that this will in turn strengthen the Board of Directors
and enhance Company performance over the long term. A committee of
independent directors which will identify qualified nominees
according to published procedures and criteria can also help to
minimize unrecognized biases or preferences that informal processes
may allow.
We urge you to VOTE FOR THIS RESOLUTION. We believe that
a Nominating Committee is a critical component of a sound corporate
governance system.
SHAREHOLDER RESOLUTION: CONFIDENTIAL PROXY VOTING
BE IT RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") urge that our Board of Directors take the necessary
steps to adopt and implement a policy of confidential voting at all
meetings of Company shareholders. The policy should include the
following provisions:
1. that the voting of all proxies, consents and
authorizations be secret, and that no such document
shall be available for examination, nor shall the
vote or identity of any shareholder be disclosed,
except to the extent necessary to meet the legal
requirements, if any, of the Company's state of
incorporation; and
2. that the receipt, certification and tabulation of
such votes shall be performed by independent
election inspectors.
SUPPORTING STATEMENT
We believe that it is vitally important that a system of
confidential proxy voting be established at our Company.
Confidential balloting is a basic tenet of our political electorial
process ensuring its integrity. We believe the integrity of
corporate board elections should also be protected against
potential abuses given the importance of corporate policies and
practices to corporate owners and our national economy.
Under our Company's current proxy voting system, management
may review the ballots as they arrive and resolicit the votes of
those who oppose management. We believe this creates a situation
where certain shareholders, particularly professional money
managers, may feel their business relationships may be jeopardized
by opposing management. While we have no evidence of Avondale's
management acting in an unethical manner, we believe an electoral
system that creates the potential for coercion may affect voting
results and calls the integrity of that system into question.
We urge you to VOTE FOR THIS RESOLUTION. We believe
confidential proxy voting is a cornerstone of a democratic
corporate governance system.
SHAREHOLDER RESOLUTION: BOARD DECLASSIFICATION
BE IT RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") urge that the Board of Directors take the necessary
steps, in compliance with the Company's by-laws, to declassify the
Board of Directors for the purpose of director elections. The Board
declassification shall be done in a manner that does not affect the
unexpired terms of directors previously elected.
SUPPORTING STATEMENT
The election of corporate directors is the primary avenue
in the American corporate governance system for shareholders to
influence corporate affairs and exert accountability on management.
We strongly believe that our Company's financial performance is
closely linked to its corporate governance policies and procedures,
and the level of management accountability they impose. Therefore,
as shareholders concerned about the value of our investment, we are
disturbed by our Company's current system of electing only one-
third of the board of directors each year. We believe that
allowing shareholders to annually register their views on the
performance of the Board collectively and on each director
individually is one of the best methods to insure that our Company
will be managed in the best interests of the shareholders.
We believe the poor performance of our Company relative to
its peers since the March 1988 initial public offering is a
compelling reason to reconsider the wisdom of a staggered Board.
Concerns that the annual election of all directors would leave our
Company without experienced Board members in the event that all
incumbents are voted out is unfounded. If the owners should choose
to replace the entire board, it would be obvious that the incumbent
directors'contributions were not valued.
We urge you to VOTE FOR THIS RESOLUTION. We believe that
the annual election of all directors will help enhance management
accountability.
SHAREHOLDER RESOLUTION: CUMULATIVE VOTING
BE IT RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") urge our Board of Directors to take the necessary
steps, in accordance with Louisiana state law and Company by-laws,
to adopt and implement a policy of cumulative voting for all
elections of directors.
SUPPORTING STATEMENT
Cumulative voting would provide a shareholder the number of
votes equal to the number of shares he or she owns multiplied by
the number of directors to be elected. The shareholder may cast
all of his or her votes for a single director or apportion the
votes among the candidates. Because of Avondale Industries
staggered board of directors, only two directors are elected each
year. Therefore, shareholders owning 50% of the outstanding shares
casting all their votes for one individual would be required to
elect one director, absent any other support. In the event the
Board changes the by-laws to allow for the annual election of all
six directors, that number would drop to 16.7%.
We feel that the argument that the adoption of cumulative
voting will lead to the election of dissidents to the Board of
Directors who represent the special interests of a minority of
shareholders instead of the best interests of all shareholders is
misleading. Legally binding standards of fiduciary duty compel all
directors, no matter what combination of shareholders elected them,
to act in the best interest of all shareholders. Any director who
fails to respect the fiduciary duties of loyalty and care exposes
himself or herself to significant liability. Legal recourse is
available to correct any breaches of fiduciary duty.
We do not accept the claim that in the complex world our
Company competes in, an honest difference of opinion over business
strategies and other policies of the Company makes the minority
view a so called "special interest." We contend that the election
of independent-minded directors can have an invigorating effect on
the Board of Directors, fostering improved financial performance
and increased shareholder wealth. We believe management nominees
often bow to a Chairman's desires on business strategies and
executive pay without question.
Cumulative voting, in our opinion, will increase the
competitiveness of director elections. We believe competitive
elections for director will deter complacency on the Board of
Directors, which in turn will improve the performance of our
Company and increase shareholder wealth.
We urge you to VOTE FOR THIS RESOLUTION.
SHAREHOLDER RESOLUTION: RECONSTITUTION OF COMPENSATION COMMITTEE
BE IT RESOLVED: That the shareholders of Avondales Industries, Inc.
("Company") urge the Board of Directors to take the steps necessary
to amend the by-laws of the Company to provide a Board Compensation
Committee composed entirely of directors who:
have not been employed by the Company or an affiliate in an
executive capacity within the last five years;
are not a member of another company or firm that is one of
the Company's paid advisers, consultants or a significant
customer or supplier of the Company; and
have no personal services contract with the Company.
Further, the Compensation Committe members should be selected by
the entire Board.
SUPPORTING STATEMENT
Under Section 5.2 (Compensation Committee) of the Company's
by-laws the Board is required to establish a Compensation Committee
of two directors. The by-laws further state that the two members
of the Committee are to be selected by the Chairman of the Board,
Chief Executive Officer and President. Interestingly, Section 8.1
(Designations) of the by-laws provides that the offices of
Chairman, Chief Executive Officer and President are to be held by
a single person.
Presently, Mr. Bossier, Company Chairman, Chief Executive
Officer and President, selects the members of the Compensation
Committee, who among other things set salary and bonus levels for
Mr. Bossier. Further, one of the members of the Committee, Mr.
Anthony J. Correro, III, is a partner in the law firm of Jones,
Walker, Waechter, Poitevant, Carrere and Denegre which was paid
$813,879 in 1993 by the Company for legal services rendered.
It is our belief that the Company's Chairman, Chief
Executive Officer and President should not be selecting the members
of the Compensation Committee. We believe that this selection
process raises potential conflicts of interest and compromises the
integrity of the management compensation process. We contend the
selection of Compensation Committee members who meet the criteria
outlined in the above resolution by the entire Board would
eliminate any real or perceived conflicts of interest. In our
opinion, Mr. Correro's presence on the Committee, based on his law
firm's business with the Company, raises fair questions about his
objectivity in making decisions concerning Mr. Bossier's
compensation.
We urge you to VOTE FOR THIS RESOLUTION. The methods and
criteria for evaluating and compensating managers sets the
incentive structure for how those managers will direct our Company
and therefore has a major impact on overall Company performance.
Accordingly, the interests of shareholders is best served when
management compensation decisions are made by independent-minded
individuals free from potential conflicts of interest.
OTHER MATTERS
Quorum and Voting of Proxies
The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock of the Company is necessary to
constitute a quorum. If a quorum is present, directors will be
elected by plurality vote and a majority of the shares of Common
Stock present or represented at the Annual Meeting will decide all
other questions properly brought before the meeting, such as the
Shareholder Resolutions discussed above. The Shareholder
Resolutions are precatory, thus the Board of Directors would not be
required to take the actions urged by the various Resolutions
should the Resolutions receive support of a majority of the shares
voted. If a quorum is not present, those stockholders present may
adjourn the meeting to such time and place as they may determine;
however, with respect to the election of directors, the meeting may
be adjourned only from day to day until such directors are elected.
Those stockholders who attend the second of such adjourned meetings
will constitute a quorum for the purpose of electing directors.
All proxies received by the Shareholder Committee will be
voted as specified and, in the absence of instructions to the
contrary, the Committee will cast a vote of "ABSTAIN" in the
election of nominees Albert L. Bossier, Jr. and Hugh A. Thompson
and "FOR" the Shareholder Resolutions. We suggest a vote of
"ABSTAIN" for Albert J. Bossier, Jr. and Hugh A. Thompson because
management has yet to adopt the corporate governance reform
proposal discussed in the six Shareholder Resolutions.
Independent Public Auditors
The Board of Directors has appointed Deloitte & Touche as
independent auditors of the Company for the fiscal year ended
December 31, 1994. Deloitte & Touche and its predecessor has
served as the Company's auditors since 1987. Representatives of
Deloitte & Touche are expected to be present at the Annual Meeting.
They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
Stockholder Proposals
Any stockholder who desires to present a proposal qualified
for inclusion in the Company's proxy materials relating to the 1995
annual stockholders' meeting must forward the proposal to the
Secretary of the Company at the address 5100 River Road, Avondale,
Louisiana 70094 in time to arrive at the Company prior to December
7, 1994.
THANK YOU FOR YOUR CLOSE CONSIDERATION OF THE SHAREHOLDER
RESOLUTIONS PRESENTED IN THIS PROXY STATEMENT.
PLEASE VOTE "FOR" EACH OF THE RESOLUTIONS ON THE ENCLOSED BLUE
PROXY CARD.
PROXY
PROXY SOLICITED BY THE AVONDALE SHAREHOLDER COMMITTEE
The undersigned hereby appoints John Meese, Ed Durkin and
Phil Miller, or their designees and each of them jointly and
severally, proxies with full power of substitution to vote, as
designated below, all shares of common stock of Avondale
Industries, Inc. held on record by the undersigned on April 5,
1994, at the Annual Meeting of Shareholders to be held on May 6,
1994, or at any adjournment thereof.
1. Election of Directors
Nominees for Class II Directors: Albert L. Bossier, Jr., Hugh A.
Thompson.
___ Vote FOR all nominees listed above, except vote withheld from
the following nominee(s) (if any):
2. Independent Board Resolution
___ FOR ___ AGAINST ___ ABSTAIN
3. Nominating Committee Resolution
___ FOR ___ AGAINST ___ ABSTAIN
4. Confidential Proxy Voting Resolution
___ FOR ___ AGAINST ___ ABSTAIN
5. Board of Directors Declassification Resolution
___ FOR ___ AGAINST ___ ABSTAIN
6. Cumulative Voting Resolution
___ FOR ___ AGAINST ___ ABSTAIN
7. Reconstitution of Compensation Committee
___ FOR ___ AGAINST ___ ABSTAIN
This proxy when properly executed will be voted in the
manner directed by the undersigned. If no voting instructions are
provided, the vote of "ABSTAIN" will be cast in the matter of the
Class II nominees Albert L. Bossier, Jr. and Hugh A. Thompson and
will be voted FOR the Shareholder Resolutions.
The Undersigned Thereby Revokes Any Prior Proxy Heretofore
Given to Any Person or Persons.
Note: Please sign exactly as names appears on registered shares.
Date: _________________________________, 1994
_____________________________________________
_____________________________________________
Signature of Shareholder(s). Please sign, date and
return today in enclosed. This proxy will not be
used if you attend the meeting in person and so
request.